Review of the Year 2007 Delivering Value by liuqingyan


									Review of the Year 2007
Delivering Value
Pictorial Theme
The pictorial theme of this Annual Review is the spirit of partner-
ship: with our suppliers and with our airports. The placement of
shopping bags in typical airport operational environments is
intended to symbolise the spirit of partnership. Shopping bag
photos were shot at Singapore Changi Airport while manage-
ment team photos were shot at Hong Kong International Airport.
Thank you to both of these important airport partners. Thank
you as well to our supplier partners who enthusiatically provided
permission for us to utilise their brand logos to highlight our
theme. Of course, we were not able to utilise the brand logos of
all of our supplier partners. This does not diminish their value
or importance to Nuance – merely the practicality of space
contraints. Thank you to all of our supplier partners.

Company profile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
President & CEO’s report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
The global travel retail market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

A review of 2007
Operational review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Recognition: a series of awards. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Concessions and contracts won and renewed . . . . . . . . . . . . . . . . . . . . . . 22
Strategy in action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

Corporate governance
Board Members and Committees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Executive Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Shareholders, Auditors and Investor Relations . . . . . . . . . . . . . . . . . . . . . . . 38

    Company profile

    Swiss-based The Nuance Group is one of the lead-
    ing players in the travel retail industry. The Group’s
    portfolio includes 400 outlets across 58 airports and
    20 countries around the globe. In addition to its duty
    and tax free stores, Nuance operates specialist
    shops and brand boutiques, Food & Beverage
    operations, a distribution business, stores at
    casinos and resorts as well as outlets on board
    airplanes and ferries. Some 5,000 employees work
    for The Nuance Group worldwide.

    Angola                      Ireland
    • Luanda                       Ferries

    Australia                   Macau
    • Brisbane                     Macau
    • Cairns
      Canberra                  Malta
    • Melbourne                 • Luqa
    • Perth
    • Sydney                    Netherlands
                                • Amsterdam
    • Vienna                    New Zealand
                                • Auckland
    Canada                      • Christchurch
    • Calgary                   • Wellington
    • Toronto
    China                       • Faro
    • Zhuhai                    • Horta (Azores)
                                • Lisbon                     Sweden         • Skelleftea
    Germany                     • Porto                      • Gothenburg   • Stockholm-Arlanda
    • Hamburg                   • P. Delgada (Azores)        • Halmstad     • Stockholm-Bromma
                                • Sta. Maria (Azores)        • Jönköping    • Umea
    Hong Kong                                                • Kalmar
    • Hong Kong                 Singapore                    • Karlstad     Switzerland
                                • Singapore                  • Lulea        • Geneva
    India                                                    • Malmö        • Zurich
    • Bangalore                                              • Norrköping
    • Hyderabad                                              • Östersund

Turkey                UK                  USA                 Legend:
• Adana               • Bristol           • Denver            • Existing operation
• Antalya             • Cardiff           • Fort Lauderdale   • Operation from 2008
  Kapikule (border)   • London-City       • Houston             Off-airport operation
• Kayseri             • London-Gatwick    • Las Vegas
• Trabzon             • London-Heathrow   • Chicago
                      • London-Stansted
                      • Manchester
                      • Prestwick
                        Center Parcs

                                                                       President & CEO’s report

Delivering Value
Overview                                                   Sales Growth
The Nuance Group (Nuance) had a successful year            Overall, Nuance consolidated sales in 2007 grew by
in 2007, commencing to once again deliver the kind         9.4 per cent to CHF 1,764 million, a record for the
of value expected by our shareholders, landlord            Group. On an aggregate basis (with joint ventures
partners, suppliers and employees.                         included at 100 per cent), sales reached CHF 2,266
                                                           million. This sales growth was achieved despite our
From a financial perspective, we recorded a                exit from large volume (but unprofitable) contracts at
significantly improved performance across all the          Copenhagen and Vancouver airports and the con-
major indicators including sales, productivity and         tinued restriction on the sale of Liquids, Aerosols
profitability. Following the hard work of the last three   and Gels (LAGs) impacting our business, particularly
years in restructuring the company and improving           in Australia and Canada.
operations, this improvement in performance is
particularly welcome.                                      Like-for-like sales growth (excluding Copenhagen
                                                           and Vancouver) was 12.8 per cent, representing
While we are pleased with the significant progress         substantial growth in one of Nuance’s key perform-       Roberto Graziani
we have made in 2007, more work remains to be              ance indicators, passenger spend rate. In Asia,          President & CEO
done as we strive towards our objective of delivering      Hong Kong and Singapore both recorded strong
to our stakeholders industry leading performance.          double digit sales growth. The Australian operations,
                                                           while recording improved sales, continued to be
Market Growth                                              hampered by the LAGs restrictions. In Europe, sales
The past year has been an exceptional one for the          grew by 16.4 per cent, with all countries except for
aviation industry. According to the Airports Council       one showing significant improvements; while in
International, overall passenger traffic increased by      North America, like-for-like sales (following the exit
5.6 per cent in 2007, exceeding world Gross                from Vancouver Airport) increased by 17.2 per cent.
Domestic Product (GDP) growth of 3.6 per cent
(source: World Bank). This marks a substantial             In addition to passenger growth, the strong sales
return to the long term trend of passenger growth          performance in 2007 also reflects the impact of a
exceeding GDP growth and vindicating Nuance’s              number of performance improvement initiatives
decision to focus on retailing to this high growth         undertaken by the company over the past years. In
segment of the market: airport and travel retail.          2007, we completed the global roll out of our Best
                                                           Selling initiative and further progress was made in
International passenger traffic in particular grew by      the roll out of our global IT platform, SAP3 Retail.
7.4 per cent, fuelled by very strong growth in China
and India (amongst others), as well as the emer-           Profitability Growth
gence of the long haul low cost carrier model. Air-        In 2007, EBITDA reached CHF 69.3 million (up 23.4
lines recorded strong profitability and invested at        per cent) while Operating Profit (EBIT) increased by
record levels in new aircraft, particularly the Airbus     36 per cent to CHF 43.6 million. The Group was also
A380 and the Boeing 787. This investment is expect-        able to significantly improve its net income.
ed to deliver strong improvements in productivity and
sustainability and hence further passenger growth.

              President & CEO‘s report

    This improvement could have been stronger without            Other positive developments in 2007 relate to
    the impact of LAGs on sales in some locations                regulatory change. In Australia, it is now possible for
    where    Nuance     is   operating    under    Minimum       Nuance to sell all categories in its Arrivals stores.
    Guarantees and without the negative impact of                This is expected to generate a material improvement
    the weakening US dollar.                                     in our business. We also anticipate that Switzerland
                                                                 will adopt Arrivals Duty Free (expected in spring
    Changes to our Store Portfolio                               2009) and I urge all airports and governments
    The current Nuance portfolio of airport locations            to consider the introduction of Arrivals retailing in
    grew to 20 countries, 58 airports and 400 outlets.           the near future from a LAGs, security, operational
    The year commenced with Nuance retaining its                 efficiency and environmental perspective.
    award winning Perfume & Cosmetics concession at
    Singapore Changi International Airport for a further         Singapore also recently harmonised its LAGs
    three years with a two year option. In addition,             arrangements with Europe which should ameliorate
    Nuance added four specialty and two food and                 some of the impact of LAGs on sales in this
    beverage outlets to its portfolio at Singapore Airport.      jurisdiction, although this will require a concerted
                                                                 campaign in cooperation with the Airport operator,
    In April 2007, Nuance entered into a strategic partner-      CAAS, to restore consumer confidence. We look
    ship with the Fraport/IC consortium which granted            forward to other countries taking up Singapore’s
    us the right to operate retail at all terminals at Antalya   lead in harmonizing their LAGs arrangement with
    Airport until 2024. This critical contract will see our      Europe so that we and the entire travel retail
    business in Turkey more than double as we benefit            industry can put this negative influence behind us.
    from the growth being experienced in this market,
    as well as synergies of operating from all terminals.        In early 2007, Nuance completed its exit from
                                                                 Vancouver and Copenhagen airports, while later in
    Further changes to the portfolio in 2007 included            the year, Nuance was unsuccessful in retaining and
    the extension of our current contract in Calgary to          expanding its concession at Auckland Airport.
    2017, expansion of our store portfolio in Geneva,            Consequently a decision was taken to sell our
    Zurich, Manchester and Hong Kong, as well as                 New Zealand operations to DFS. In early 2008, the
    adding Hamburg and Chicago O’Hare airports to                New Zealand Commerce Commission (NZCC)
    our list of locations, both of which are expected to         declined   permission    for   the   transaction   and
    commence operations in 2008.                                 commenced an investigation into the original
                                                                 decision by Auckland Inter-national Airport Limited
    While airports continued to account for more than            to go from two duty free operators to just one.
    94 per cent of Nuance sales, 2007 also saw Nuance            At the time of writing, this situation is still quite
    develop into two related travel retail channels:             fluid and the outcome of the NZCC investigation will
    casinos and resorts. In August, the Nuance-Watson            obviously impact our next steps in New Zealand.
    joint venture opened a 2,000 square metre store at
    the Venetian Casino & Resort in Macau, while in              Developing the India & China Markets
    November, Nuance commenced operating 2,100                   In 2006, the focus of our business development
    square metres of retail outlets at four Center Parc          effort was on securing our entry into the Indian
    resorts in the United Kingdom.                               market. This was achieved with the Nuance/Shop-
                                                                 pers’ Stop joint venture securing retail space in both

                                                                    President & CEO‘s report

Hyderabad and Bangalore airports. In 2007 our           both efficiency and improved sales and I expect
focus has been on implementing these contract           additional benefits in 2008. This new organisational
wins and I am pleased to report that we opened for      model will also provide us with the possibility to
business in Hyderabad in March 2008 and expect          enter new small to medium-sized markets on the
to open in Bangalore soon (May 2008). We continue       basis of specialty retail alone.
to look for additional opportunities in this critical
market.                                                 In 2007, we continued to make significant invest-
                                                        ments in the development of our people. The global
In addition to building on our success in India,        roll out of our sales productivity training programme,
2007 also witnessed the development of Nuance’s         Best Selling, was completed with successful
presence in the China market. While Nuance has          launches in Hong Kong and Singapore. The Group
been operating in Hong Kong since 1997 through          also embarked on a new, company-wide training
the Nuance-Watson joint venture, 2007 saw our           programme called “Transformational Leadership”,
partnership commence operations at its first main-      which focusses on developing the leadership and
land China location, Zhuhai Airport. While our oper-    change management skills of fifty of our current and
ations at Zhuhai are relatively small, they represent   high potential managers. We believe that people are
an important step in the development of the China       our most important resource and therefore we are
market. Continued efforts will be made to make          committed to train and offer them both competitive
more inroads into this critical high-growth market      opportunities and stimulating work environments.
and a number of potential opportunities have already
been identified.                                        2008 Outlook
                                                        At the time of writing, the economic outlook for
Organisational Changes                                  2008 appears to be deteriorating as the US sub-
Following a number of changes to the management         prime credit crisis appears to be spreading and im-
team made in recent years to address the challenges     pacting on consumer confidence. Although it is still
facing the company, another two important changes       too early to determine the extent of this impact,
were made in 2007. In April, Ivo Favotto joined         Nuance expects to continue to grow both sales and
the team as Executive Vice President – Strategy &       profitability in 2008 through ongoing initiatives to
Business Development with a mandate to pursue           increase passenger spend rates across our network
growth, while in November, Jann Fisch joined            and through the commencement of operations
the team as CEO of our Australia & New Zealand          in India (Hyderabad and Bangalore) and other new
operations to lead the restructuring of this business   important airport locations.
towards a more profitable future. I welcome Ivo and
Jann to the team.                                       Finally, thank you to all of our staff, as without their
                                                        commitment and hard work, the improvements we
In Europe, a significant organisational change dubbed   have achieved in our performance would not have
“One Europe” was implemented. The One Europe            been possible.
programme was designed to improve efficiency and
capability across our European network of stores by
centralising key functions such as buying, merchan-
dising, marketing and finance. The project has          Roberto Graziani
already delivered substantial benefits in terms of      President & CEO

                                                                                   The Global
                                                                                   Travel Retail Market

Travel Trends
                                                                       As the wealth of society grows, an increasing
 Global GDP, PAX and International
                                                                       proportion of global income is spent on air travel,
 PAX Compound Annual Growth Rate (1961-2007)
                                                                       for both business and leisure reasons. In 2007,
 15                                                                    each man, woman and child in the world took, on
                                             Global GDP CAGR           average, 0.7 air trips, with many mature countries
                                             Global Pax CAGR
                                             Global Int Pax CAGR       recording an average of more than four.

                                                                       In 2007, airport passenger growth increased by 5.6
  5                                                                    per cent, compared to global GDP growth of 3.6 per
                                                                       cent, in line with the long term trend of traffic growth
                                                                       exceeding economic growth. International traffic
      1961 – 1970 1971 – 1980 1981 – 1990 1991 – 2000    2001 – 2007   grew by a particularly strong 7.4 per cent, while
                                                                       domestic traffic grew by 4.2 per cent.
 ICAO, ACI and World Bank

                                                                       The strongest growth was experienced in emerging
As a retailer specialising in the travel retail market,                markets, including the Middle East, Africa, Latin
Nuance closely follows travel trends, particularly in                  America and Asia Pacific. All recorded above average
aviation. Air travellers account for around 94 per                     growth, as did Europe. Weighed down largely by
cent of Nuance’s total sales.                                          domestic issues, only the largest market, North
                                                                       America, recorded below average growth.
In most years since the early 1960s, growth in global
aviation passenger movements has exceeded
growth in global Gross Domestic Product (GDP),
with the odd exception such as the early years of
this decade when an aviation downturn was caused
by the events of September 11, 2001 and the SARS
Virus health crisis. In each decade since 1960, traffic
growth has exceeded GDP growth. In the past
decade, total traffic growth has exceeded GDP
growth by 100 per cent, while international traffic
growth has exceeded GDP growth by 155 per cent.
This growth differential highlights the attractiveness
of travel retail. Air travellers also tend to have a
strong socio-economic profile, making airports a
highly attractive channel to brand companies.

       The Global Travel Retail Market

     There are many factors that drove passenger growth          increase on 2006, despite a growing world wide
     in 2007. These included:                                    focus on airport security which hampered retail
     • strong export and investment led economic                 operations in many locations. While some of this
        growth in India and China;                               growth is the result of currency variations due to the
     • an associated resources boom benefiting the               decline of the US dollar, own currency sales also
        world’s primary energy producers such as                 experienced strong growth compared to 2006.
        Russia, the Middle East, Australia and parts of
        Latin America and Africa;
                                                                  2007 Global Duty Free & Travel Retail Sales
     • a paradigm shift in aircraft technology, including         by Channel and Growth
        the introduction of the Airbus A380 and the
        Boeing 787, with its significant improvements                           (+ 25.3%)
                                                                       Other Shops 32.1%
                                                                                                                               (+ 8%)
        in aircraft efficiency and changes in range and                                                                        52.1% Airports

        carrying capacity;
     • a related boom in the low cost carrier segment of
        the market. In recent years, the low cost carrier
        model found purchase in the world’s largest lower
        income market, Asia. In 2007, there was a boom                          Ferries 8.8%
                                                                                   (+ 23.9%)
        in low cost carrier start ups in India, China and
                                                                                            Airlines 7%
        Asia, as well as the emergence of a new model,                                            (+ 1%)

        the long haul low cost carrier; and
                                                                  Source: Generation preliminary 2007 global duty free & travel retail sales
     • the entry of more countries into the European
        Union, opening these countries to greater invest-
        ment flows and export opportunities, fuelling             This increase in travel retail sales was assisted by
        economic and travel growth.                              underlying global passenger growth of 5.6 per cent.
                                                                 Consequently,              Passenger             Spend          Rate          (PSR)
     The growth characteristic of the travel sector is the       increased by 6.0 per cent.
     fundamental driver of Nuance’s strategy to focus
     itself as a travel retailer.                                This growth in PSR which is calculated as total sales
                                                                 divided by total passengers, is mirrored in Nuance’s
     The Travel Retail Market                                    sales for 2007, which on a like-for-like basis,
     The phenomena of growth in air travel outstripping          significantly exceeded passenger growth at our air-
     economic growth is paralleled by the growth in the          ports.
     sales of luxury and branded goods. As the wealth
     of society grows, an increasing proportion of global        Nuance’s global market share, based on aggregate
     income is spent on luxury and branded products –            sales of CHF 2.266 billion in 2007, is estimated at
     the so-called conspicuous consumption effect.               6.8 per cent.

     In 2007, global retail sales in the travel retail channel
     (airports, airlines, ferries, downtown duty free etc.)
     were estimated at USD 33 billion, a 13.8 per cent

                                                                            The Global Travel Retail Market

Regional Trends
                                                           2007 Global Duty Free & Travel Retail Sales
On a regional level, the two biggest travel retail         (by Region)
markets in terms of sales are Europe and Asia
                                                                                        (+ 22.3%)
Pacific, which together account for 69.4 per cent of                            Middle East 6.1%

the total travel retail market (41.8 per cent and 27.6                  (+ 16.4%)                                      (+ 14%)
                                                               Asia Pacific 27.6%                                      41.8% Europe
per cent respectively). Both these markets experi-
enced strong growth in 2007, with the European
market growing by 14.0 per cent and the Asia
Pacific market growing by 16.4 per cent.

                                                                         Africa 1.3%
Nuance is well positioned in these two regions which                         (+ 7.1%)
                                                                                Americas 23.2%
together account for 94 per cent of total Nuance                                       (+ 8.6%)

sales. The Group’s strategy anticipates continuing
                                                           Source: Generation preliminary 2007 global duty free & travel retail sales
focus on these two regions as they provide both scale
and stability, as well as exposure to growth. Contract
wins in 2007 in Europe (Antalya, Manchester and           Nuance also experienced strong growth in its North
Hamburg) and Asia Pacific (Singapore, Hong Kong,          American operations in 2007. While accounting for
Macau and Zhuhai) highlight the success of the            just 6 per cent of total sales in 2007 due to the exit
implementation of this strategy.                          from Vancouver, Nuance anticipates being able to
                                                          expand this region’s contribution to total Nuance
The Asia Pacific region’s contribution to global travel   sales in the coming years, highlighted by recent
retail sales has increased by almost three percentage     contract wins in Chicago O’Hare and a contract
points since 1999 – a trend Nuance expects to             extension at Calgary.
continue as the amount and quality of retail in
Chinese and Indian airports improves dramatically         Although still relatively small, the Middle East region’s
with each new terminal built.                             contribution to global travel retail sales continues to
                                                          grow. Nuance is actively scanning for opportunities
                                                          in this important region.

        The Global Travel Retail Market

     Category Trends                                                               At the same time, the Confectionery & Fine Food
     At a category level, the two biggest categories re-                           category – while still a relatively small proportion of
     mained Luxury Goods and Perfume & Cosmetics,                                  global travel retail sales – grew strongly, particularly
     which together account for 66.4 per cent of global                            in the airports channel.
     travel retail sales (36.4 per cent and 30.0 per cent
     respectively). Both these categories experienced                              Nuance is well positioned in all of these growth
     strong growth in 2007, with the Luxury Goods grow-                            categories. Perfume & Cosmetics continues to be
     ing by 16.0 per cent and Perfume & Cosmetics                                  the mainstay of the Nuance business. Nevertheless,
     growing by 15.6 per cent.                                                     the number of specialty/luxury stores within the
                                                                                   Nuance portfolio is growing rapidly. At the same
     Perfume & Cosmetics is a relatively stronger                                  time, Confectionery, both within general and
     category in airports, accounting for 68.0 per cent                            specialty stores is growing at above average rates.
     in that channel, while Luxury Goods is relatively                             Despite the decline in their relative contribution,
     stronger in the off-airport market.                                           Wines & Spirits and Tobacco continue to be
                                                                                   important. Not only are these categories important
                                                                                   footfall drivers, there are a number of growth spots,
      2007 Global Duty Free & Travel Retail Sales
      (by Category)                                                                including wine, champagne and cigars, which
                                                                                   increasingly feature as part of Nuance’s category
                                   (+ 15.2%)
                         Confectionery 8.6%             (+ 10.7%)                  plans.
                                                        16.8% Wines & Spirits

       Luxury Goods 36.4%
                   (+ 16%)
                                                                  (+ 15.6%)
                                                                  30% Perfume &
                                               (+ 3.7%)
                                               8.2% Tobacco

      Source: Generation preliminary 2007 global duty free & travel retail sales

     Although still growing, the Wines & Spirits and
     Tobacco categories’ relative contribution to global
     travel retail sales declined.

     Operational review 2007

                           The Nuance Group Europe
                           In 2007, The Nuance Group Europe had a very                   Sales in the UK reflect the good performance of the
                           successful year. Sales recorded double-digit growth           retail operations (regional airports, specialty shops
                           driven by strong passenger volumes as well as                 at major airports and ferries) on one hand and
                           significant improvements in capture and average               a more difficult year for our distribution business
                           spend. From an organisational point of view, the              on the other hand. The local organisation was
                           European operations were streamlined through the              significantly streamlined. Nuance opened a Hugo
                           centralisation of the Buying, Marketing and HR                Boss outlet at Stansted Airport and was awarded
                           functions as well as the creation of a Shared Service         three concessions for the new Heathrow Terminal 5.
                           Center Finance, all of which contributed to enhance           For the new Manchester Terminal 1, Nuance was
                           the profitability of the region.                              awarded 950 square metres of retail space entirely
                                                                                         dedicated to fashion & accessories. In addition,
                           The year 2007 also provided Nuance with the                   Nuance is expanding into the resort sales channel
                           opportunity to enter the German market by being               by taking over 2,100 square metres of fashion
                           awarded several specialty shop concessions for                retailing at UK Center Parcs in early 2008. Finally,
        Jean-Paul Bonnel   Hamburg Airport. The Nuance Group also entered                our contract in London City was extended for
                    CEO    into a joint venture for distribution in Bulgaria. Overall,   another two years.
 The Nuance Group Europe   Nuance won concessions for and/ or opened 53 new
                           shops airside, landside and outside airports across           In the Netherlands, Nuance extended its confec-
                           Europe in 2007.                                               tionery concession for another three years, but dis-
                                                                                         continued the operation of the liquor and tobacco
                           In Switzerland, sales growth at both Zurich and               shop on Holland Boulevard at Amsterdam Airport
                           Geneva Airports exceeded traffic growth. Both oper-           Schiphol in November.
                           ations benefited from increased passenger spend-
                           ing across all categories. Nuance has refurbished             In Malta, Nuance achieved sales growth far beyond
                           and extended the offer at gate shops at Zurich                passenger growth. The modernisation of the
                           Airport and will open a dozen specialty shops air-            departure shop layout and review and extension of
                           side and landside in the course of 2008. Our shop             the product offer resulted in a significant increase
                           portfolio in Geneva was expanded by the opening of            in conversion rates. In addition, our local team
                           two specialty shops in the airport’s landside shop-           successfully pioneered our new SWIFT shop
                           ping area.                                                    concept at both Arrivals and gate areas.

                           Sales levels in Sweden were strong despite the                Nuance recorded double-digit growth in Austria
                           security restrictions and the negative effect of              thanks to the strong increase in passenger numbers
                           changed passenger flows at Arlanda Airport. At both            at Vienna Airport as well as the improved perform-
                           Arlanda and Gothenburg Airports, Nuance carried               ance of the local team following the introduction of
                           out extensive refurbishment of the shops, reviewed            the Best Selling programme.
                           space allocation among categories and extended
                           the offer to new categories. Nuance has also been             In Portugal, the joint venture with TAP enjoyed a
                           awarded the concession to operate at Bromma Air-              very strong sales performance driven by both a
                           port where it will open for business in spring 2008.          strong increase in traffic as well as in average

spending. A Travel Shopping store at the new Lisbon             For 2008, The Nuance Group Europe again expects
domestic terminal, a Fashion Gallery shop at Faro               double digit growth in sales due to improvements
Airport and a Gift shop at Oporto Airport were                  in PSR and expanded operations. At this point,
added to the portfolio. The main shop at Oporto                 we plan to open some fifty new stores across the
was refurbished. Furthermore, the local operation               European operations, including the new market entry
launched an innovative in-store communication                   in Germany.
concept based on plasma screen TV.

                                                                 Facts & Figures
Our local team in Turkey has leveraged both the
                                                                 Countries                  9
increase in and the favourable mix of passengers in
                                                                 Airports                   36
Terminal 1 at Antalya Airport to significantly develop
                                                                 Other locations            1 land border
sales. More importantly, our joint venture in Turkey
                                                                                            4 ferries
was awarded a 15-year, multi-billion sales contract
                                                                                            1 downtown location
for all terminals at Antalya Airport starting from
                                                                 No. of outlets             191
September 2009.
                                                                 Total sales area           21,052 sqm
                                                                 Employees (head counts) 2,021
                                                                 As per December 31, 2007

The new Manchester fashion concept, setting new standards in airport retailing.

                                     Operational review 2007

                        The Nuance Group North America
                        The year 2007 was challenging yet successful for           The full development in Toronto was recognised
                        The Nuance Group North America. Continued Liquid,          through nominations by Raven Fox as best new air-
                        Aerosols and Gels (LAGs) restrictions and a power-         port opening and listed in the top three by The
                        ful Canadian dollar surge were balanced by new             Moodie Report.
                        shops in Toronto, renovated shops in the United
                        States and a weak US currency.                             Through January 2008, same store sales are run-
                                                                                   ning over ten per cent over 2007. The Nuance Group
                        Downstream shops for US bound passengers in-               North America expects this trend to continue in the
                        creased those sales by 35 per cent. Expanded               absence of any major event, positive or negative.
                        offerings in fashion and gifts, combined with 1,734
                        square metres of new retail space, lifted sales in
                                                                                    Facts & Figures
                        Toronto by 27 per cent over 2006 despite continued
                                                                                    Countries                   2
                        LAGs restrictions.
                                                                                    Airports                    6
                                                                                    No. of outlets              55
       Richard Rendek   New shops in our US locations, combined with
                                                                                    Total sales area            5,646 sqm
                 CEO    increased travel and a weak US dollar, propelled
                                                                                    Employees (head counts) 497
     The Nuance Group   sales to an increase of 45 per cent over 2006. The
                                                                                    As per December 31, 2007
        North America   prior year was not a full operating year for all of our
                        US locations.

                        While our existing shops are now a fresh network in
                        the region, our capital expenditures will switch focus
                        to the City of Chicago. Nuance is part of a US joint
                        venture that was awarded the duty free contract for
                        Terminals 1, 2 & 3 at Chicago’s O’Hare International
                        Airport in late 2007. We expect to be operational in
                        the airport before the end of 2008.

                        The region managed the exit of its Vancouver busi-
                        ness, skilfully resulting in no erosion to EBIT in 2007.
                        Nuance has no further commitments to on or off air-
                        port business in Vancouver, resulting in improved
                        inventory management through reduced niche

                                                                     Operational review 2007

The Nuance Group Australia & New Zealand
For The Nuance Group Australia & New Zealand,            Nuance continued to make significant investment in
2007 was a year of restructure and change. It has        our operations, spearheaded by the Best Selling
been a tumultuous year but one that has prepared         programme, and was proud to receive a Federal
the organisation for enhanced performance in 2008.       Government Australian Training Award for Innova-
                                                         tion and Business for the training programme.
Sales across the region increased but were behind
target. Externally, LAGs restrictions were a major       The concession at Darwin Airport ceased in January
structural shock for the business and were damag-        and the decision was taken not to renew the lease
ing for a large proportion of the flight mix with pass-   on our downtown Sydney store in November.
engers transiting onwards. While LAGs restrictions
remain, they will continue to dampen business            The New Zealand business performed well in 2007
growth. At the same time, both Australian and            with significant and maintained share gains in Auck-
New Zealand currencies were at twenty-year highs         land Airport and the establishment of operations at
versus the US dollar adding pressure to our relative     Wellington Airport. Nuance was unsuccessful in
price perception.                                        retaining and expanding its concession at Auckland           Jann Fisch
                                                         Airport. Consequently a decision was taken to sell           CEO
In February, a wide-ranging turnaround programme         our New Zealand operations to DFS. In early 2008,            The Nuance Group
commenced, impacting every area of the business.         the New Zealand Commerce Commission (NZCC)                   Australia & New Zealand
This work will continue in 2008 and fourth quarter       declined    permission      for   the   transaction   and
results showed material improvement from these ef-       commenced an investigation into the original
forts. The Australian business undertook substantial     decision by Auckland International Airport Limited
restructuring. The entire Director team was replaced     to go from two duty free operators to just one.
over a thirteen month period and major restructures      At the time of writing, this situation is still quite fluid
of several departments took place. The head office       and the outcome of the NZCC investigation will
and central warehouse were relocated and a series        obviously impact our next steps in New Zealand.
of supply chain improvements commenced.

                                                          Facts & Figures
New brands, “SYD Airport Tax and Duty Free” and
                                                          Countries                        2
“F1RST Tax and Duty Free” were successfully
                                                          Airports                         8
implemented in Sydney, Melbourne and Perth to
                                                          Other locations                  2 downtown locations
accompany store refurbishments and work is now
                                                                                           1 wholesale
underway on further refurbishments in all airports.
                                                          No. of outlets                   57
The “Ready for Collection” service was relaunched
                                                          Total sales area                 17,792 sqm
and had rapid growth, supported by a new website.
                                                          Employees (head counts) 1,309
                                                          As per December 31, 2007
After a major lobbying effort, from October onwards
all categories were opened for sales on arrival in
Australia. This provided an additional boost to the
already thriving Arrivals business.

                                          Operational review 2007

                               Nuance-Watson (Hong Kong)
                               With the sustained economic growth in China and         minal 1 at HKIA also won the prestigious Frontier
                               Asia generating strong demand for aviation services,    Award for the “Best Partnership Initiative of the Year”.
                               traffic at Hong Kong International Airport (HKIA)       Nuance-Watson (Hong Kong) was also a nominated
                               grew by 7.5 per cent in 2007. Nuance-Watson             finalist in the run for the Frontier Award “Airport
                               (Hong Kong) recorded a robust growth of 19 per          Retailer of the Year”. In December, Nuance-Watson
                               cent across its shops at HKIA in the year, surpass-     (Hong Kong) staff from “The Plaza” and “Peninsula
                               ing the airport passenger growth rate and the global    Boutique” received the 2007 Service & Courtesy
                               retail growth at the mall.                              Awards from the Hong Kong Retail Management
                                                                                       Association, which recognized its superior customer
                               For Nuance-Watson (Hong Kong), 2007 was a year          service in the Department Stores and Food Shop
                               of expansion both at HKIA and beyond. In January,       categories.
                               five new stores were added in the newly opened
                               Terminal 2 (Sky Plaza) at HKIA. Two new concept         Looking forward to 2008, the Asian economies are
                               stores were opened in Terminal 1.                       set to continue the growth trend, riding on the fast
      Alessandra Piovesana                                                             growing Chinese economic engine in the run-up to
 Regional Managing Director,   Nuance-Watson (Hong Kong) retail businesses have        the 2008 Summer Olympics in Beijing. As the core
                 North Asia,   extended beyond the HKIA boundary when in               General Merchandise and Perfume & Cosmetic
Nuance-Watson (Hong Kong)      August 2007, the 2,000 square metre “Atrium”,           licences have been successfully extended at HKIA
                               debuted    in   the   Venetian   Resort   in   Macau,   until mid 2010, further investments and store
                               a neighbouring Special Administration Region of         expansions have been earmarked to capture further
                               China. In November Nuance-Watson (Hong Kong)            sales opportunities. Furthermore, Nuance-Watson
                               opened “The Plaza” department store and a               (Hong Kong) will consolidate the two new oper-
                               Watsons pharmaceutical and personal care outlet at      ations at Macau and Zhuhai, as it embarks on a
                               Zhuhai Airport in the Southern China province of        structured growth plan in the region.
                               Guangdong, in cooperation with the Hong Kong
                               Airport Authority which co-manage the airport
                                                                                        Facts & Figures
                               with the Zhuhai city government. This marked a
                                                                                        Countries                     3 territories
                               significant strategic entry to the fast growing China
                                                                                        Airports:                     2
                               market and also paved the way for further
                                                                                        Other locations               1 outlet at a
                               investment opportunities in the Chinese travel retail
                                                                                        No. of outlets                55
                                                                                        Total sales area              8,826 sqm
                               Nuance-Watson’s (Hong Kong) dedicated store
                                                                                        Employees (head counts) 712
                               design and customer services were rewarded as
                                                                                        As per December 31, 2007
                               the “Atrium Macau” won the 2007 DFNI Product
                               Award for “Best New Watches Store”. The store
                               features a wide selection of luxury goods in a de-
                               partment store type setting, replicating the elegant
                               design of the very successful “Master of Time” bou-
                               tique at HKIA. The “La Prairie Beauty Centre” at Ter-

                                                                       Operational review 2007

Nuance-Watson (Singapore)
2007 was a very successful year for Nuance-Watson          As in the previous years, the travel retail community
(Singapore). Healthy economic growth in Singapore          once more selected Nuance-Watson (Singapore) for
with low unemployment and spiralling property prices       a series of distinctions honouring the company’s
fuelled a positive outlook. Despite the impact on          retail standards. This year’s awards won were “Best
sales of the various LAGs restrictions, the business       Fragrances & Cosmetics Travel Retailer” and “Asia-
grew strongly, particularly in the second half of the      Pacific Travel Retailer of the Year” bestowed by
year. As a result, sales for the full year exceeded        Raven Fox.
                                                           For 2008, we expect high double-digit sales growth
The driving forces behind these developments were          for the Perfume & Cosmetics concession due to the
the continuing strong growth of traffic and improve-       addition of the new Terminal 3 with better customer
ments in PSR. High double-digit growth from the            penetration and improved passenger flow. Equally,
People’s Republic of China resulted in a positive          the shift in passenger profile to passengers with
impact on sales. In addition, business from budget         higher spending power should lead to higher
carriers surged forward in sales with expanded             average transaction value. The company will             Ken Tse
routes to Australia, China and India. This low cost        continue its endeavours to further expand its port-     Managing Director
carrier segment has seen huge sales growth over            folio of concessions at Singapore Changi Airport        Nuance-Watson (Singapore)
the past two years. Furthermore, strong promotions         by tendering for additional business.
encouraged higher sales to frequent travellers.

                                                            Facts & Figures
A key milestone achieved during the year was the
                                                            Countries                   1
successful tender of the core Perfume & Cosmetics
                                                            Airports                    1
concession for all terminals (including the new
                                                            No. of outlets              22
Terminal 3) renewed for another three years, with an
                                                            Total sales area            3,326 sqm
option for a further two-year extension.
                                                            Employees (head counts) 539
                                                            As per December 31, 2007
During the latter part of the year, the Business
Unit expanded into general merchandise and in
November opened a retail store for an ethnic wear/
accessories brand, “Amazing Grace”. Additional
new concessions won during 2007 and opened
in January 2008 include: two Tosto Italian delis; a
Marc O’Polo premium casual wear, the first store in
Asia-Pacific; a FIFA Official Store, first concept store
of its kind in the world; and a Samsonite Originals
branded store.

Operationally, the Best Selling programme was
launched in Singapore in October 2007 and will
continue to be implemented in the course of 2008.

                                       a series of awards

Raven Fox Global Travel Retail Awards (February 07, London)
“Airport Travel Retailer of the Year“ – The Nuance Group
Raven Fox Americas Awards (April 2007, Fort Lauderdale)
“Best Airport Travel-Retail Location in the Americas“ (Highly Commended) – The Nuance Group
North America for Toronto Lester Pearson Airport
Raven Fox Asia Pacific Awards (May 2007, Singapore)
“Asia Pacific Travel Retailer of the Year“ – Nuance-Watson (Singapore)
“Best Fragrances and Cosmetics Travel Retailer in Asia Pacific“ – Nuance-Watson (Singapore)
“Asia Pacific Travel Retailer of the Year“ (Highly Commended) – Nuance-Watson (Hong Kong)
“Best Fragrances and Cosmetics Travel Retailer in Asia Pacific“ (Highly Commended) –
Nuance-Watson (Hong Kong)
“Best Food & Confectionery Travel Retailer in Asia Pacific“ (Highly Commended) –
Nuance-Watson (Hong Kong)
“Best Gifts Travel Retailer in Asia Pacific“ (Highly Commended) – Nuance-Watson (Hong Kong)
“Best Liquor Travel Retailer in Asia Pacific“ (Highly Commended) –
The Nuance Group Australia & New Zealand
Frontier Awards (October 2007, Cannes)
“Best Partnership Initiative of the Year” – Nuance-Watson (Hong Kong) and La Prairie for the La Prairie
Beauty Center at “Temptation Duty Free“, Hong Kong
DFNI Awards (December 2007, London)
“Best New Watches Store” – Nuance-Watson (Hong Kong) for the Luxury Watch Area, The Venetian Macau
“Best New Store for Confectionery & Fine Foods“ (Highly Commended) – Nuance-Watson
(Hong Kong) for the revamped foodhall at the “Plaza“ mega store, Hong Kong
“Best New Beauty Store” (Highly Commended) – Nuance-Watson (Hong Kong) for “Scent & Beauty”,
Hong Kong
“Best Marketing Campaign/Strategy” (Highly Commended) – Nuance-Watson (Hong Kong)
and Kipling for the “Kipling” outpost, Hong Kong

Raven Fox Global Travel Retail Awards (February 2008, London)
“Airport Travel Retailer of the Year“ (Highly Commended) – The Nuance Group
“Airport Travel Retailer of the Year“ (Highly Commended) – Nuance-Watson (Singapore)
“Best New Shop Opening“ (Highly Commended) – Nuance-Watson (Singapore) for Singapore Changi
Airport Terminal 3

Concessions and contracts
        won and renewed

Australia & New Zealand
Brisbane          Concession for a Burberry and Ferragamo store                        New
Cairns            Concession for two Downtown Duty Free stores                         Renewed
Canberra          Concession for a Downtown Duty Free store                            Renewed
Perth             Concession for a Downtown Duty Free store                            Renewed
Perth             Contract for a F1RST Tax & Duty Free store                           New
Wellington        Contract for a landside Duty Free store                              New
Singapore         Concession for Perfume & Cosmetics stores in Terminals 1 and 2       Renewed
Singapore         Concession for a Brek Ristorante in Terminal 2                       Renewed
Singapore         Concession for Perfume & Cosmetics stores in Terminal 3              New
Singapore         Concession for two Tosto Cafés in Terminals 2 and 3                  New
Singapore         Concession for four specialty retail concepts in Terminals 2 and 3   New
Hong Kong
Hong Kong         General Merchandise concession                                       Renewed *
Hong Kong         Temptation Duty Free concession                                      Renewed *
Hong Kong         Concession for six specialist stores in Terminals 1 and 2            New
Macau             Concession for a store in The Grand Canal Shoppes (Shopping Mall)    New
Zhuhai            Concession for a The Plaza store                                     New
Bangalore         Duty Free concession                                                 New
Hyderabad         Duty Free concession                                                 New

The new Main Duty Free Store at Toronto Airport.

                                          Concessions and contracts won and renewed

Germany            Contract for four Fashion & Accessories stores, Hamburg Airport            New *
Malta              Contract for a Duty Free store, Malta Airport                              New
Portugal           Contract for a Travel Shopping store, Lisbon Airport                       New
                   Contract for a Swatch Kiosk store, Lisbon Airport                          Renewed
                   Two concessions for onboard sales, TAP & White Airways and                 Renewed
                   SATA Internacional
Sweden             Concession for a Sun and Watch store, Stockholm Airport                    New
                   Contract for a Spirit of Sweden store                                      New
Switzerland        Concession for a Tax Free Pier store, Geneva Airport                       New
                   Concession for a landside Fashion store, Geneva Airport                    New
                   Concession for three landside Fashion stores and                           New
                   Promotional Spaces, Zurich Airport
                   Concession for onboard sales, Edelweiss Air                                Renewed
Netherlands        Duty Free concession, Amsterdam Airport                                    Renewed
Turkey             Duty Free concession, Adana Airport                                        Renewed
                   Duty Free concession, Antalya Airport                                      Renewed
                   Contract for a Turkish Food platform stand, Antalya Airport                New
                   Duty Free concession, Kayseri Airport                                      Renewed
                   Duty Free concession, Trabzon Airport                                      Renewed
UK                 Concession for a specialist store, Bristol Airport                         New
                   Concession for a Travel Shopping store, Cardiff Airport                    Renewed
                   Concession for two Jewellery stores, London Gatwick Airport                Renewed
                   Concession for two specialist stores at Terminal 4,                        Renewed
                   London Heathrow Airport
                   Concession for three specialist stores at Terminal 5,                      New
                   London Heathrow Airport
                   Concession for a Fashion Gallery store at Terminal 1, Manchester Airport   New *
                   Concession for two specialist stores, London Stansted Airport              Renewed
                   Concession for retail outlets at four Center Parcs Villages, United Kingdom New
North America
Calgary            Duty Free concession                                                       Renewed
Ft Lauderdale Duty Free concession                                                            Renewed
* signed in early 2008

                                                                     Strategy in action

For a number of years now, the operation of The          • Leverage – Nuance’s biggest opportunity to
Nuance Group has been guided by its mission:               achieve profitable and sustainable growth is to
                                                           leverage the substantial business it already has in
“Maximising long term shareholder value through            place. Nuance has many hard and soft assets
sustainable profit growth”.                                from which it can leverage: its operating experi-
                                                           ence across the globe, its relationships with 58
The Group strives to achieve this mission through its      airports and landlords, its significant investment
values: understanding its customers, tailoring retail      in back-of-house infrastructure, its retail concepts
solutions, achieving operational excellence, sharing       and its relationship with vendors. Leveraging off
best practice, investing in staff and true partnership     these assets translates into finding additional
with our vendors and landlords.                            business at our existing or nearby locations;

In 2007, Nuance’s strategy for bringing this sustain-    • Differentiation – core category retailing is
able profit growth mission to life was refined so that     becoming increasingly difficult to differentiate in
it is now based on three pillars:                          terms of product offering as 70 to 80 per cent of
                                                           product is common throughout the world. Never-
                                                           theless, Nuance believes growth can be achieved
                                                           by differentiating in other ways: ensuring Nuance
                The Nuance Group’s                         achieves operational excellence through its
                  Growth Strategy                          investment in training and systems, and building
                                                           new concepts that meet the ever changing needs
                                                           of our consumers and airport markets; and

                                                         • Spread – Nuance can also achieve growth
                                                           through spread. The various aspects of spread

                                                           include: new geographic markets such as China,


                                                           India, Eastern Europe, Russia and the Middle
                                                           East; new travel retail channels such as casinos
                                                           and resorts; and new business models aimed at
                                                           either expanding the business or managing risk
                                                           (or both).

                                                         Set out over the following pages are some examples
                                                         of this strategy in action.

                                                            Strategy In Action
                                                         Leverage – Example 1

                                           Diversifying the offer at Singapore Airport
                                           One primary focus of Nuance’s growth strategy is
      The Nuance Group’s
        Growth Strategy                    to attract additional business at existing locations.
                                           The objective is to leverage assets such as intimate
                                           market   knowledge,       established   back-of-house

                                           infrastructure and long-standing relationships with

                                           airports and suppliers.

                                           In 2007, this objective was achieved in Singapore.
                                           Having held the Perfume & Cosmetics concession
                                           for Singapore Changi Airport for six years and
                                           operated the Group’s first restaurant business          Consequently, in addition to its 24 “Perfumes &
                                           since 2004, Nuance-Watson (Singapore) set out to        Cosmetics” outlets across all four terminals and one
                                           significantly broaden its base of business. The         Brek restaurant, Nuance has added:
                                           development of Terminal 3 at Singapore Airport          • two Tosto coffee shops in the Arrivals halls of
                                           also provided a unique opportunity, with a number         Terminals 2 and 3;
                                           of locations becoming available for tender.             • an Amazing Grace Asian souvenir concept,
                                                                                                     already very successful with our Hong Kong
                                                                                                   • two stand-alone branded fashion concepts – the
                                                                                                     world’s first FIFA Official store and Marc O’Polo’s
                                                                                                     first casual wear fashion store to open outside of
                                                                                                     Europe, both of which are airside in Terminal 3;
                                                                                                   • one luggage store – a Samsonite Originals store,
                                                                                                     landside Departures in Terminal 3.

                                                                                                   Ken Tse, Executive General Manager, Nuance-
                                                                                                   Watson (Singapore), explains what enabled the
                                                                                                   company to tender for these new concessions so
                                                                                                   successfully: “We have a proven record of working
                                                                                                   in close co-operation with the Airport Authority of
                                                                                                   Singapore (CAAS) and have, over the years, estab-
                                                                                                   lished a reputation for always being at the forefront
                                                                                                   of new developments, introducing new brands, new
                                                                                                   products, new systems ahead of our competition
                                                                                                   and, many times, also ahead of the local market”.

                                                                                                   Nuance will continue to seek opportunities to
                                                                                                   broaden its portfolio of stores at Singapore Airport
                                                                                                   in 2008 and beyond.

                                                                       Strategy In Action
                                                                       Leverage – Example 2:

Winning exclusivity in Antalya
Achieving growth by leveraging existing assets is a      Urart A.S. had been managing the duty free
                                                                                                                 The Nuance Group’s
key component of The Nuance Group’s growth               concession at Antalya’s Terminal 1 since 1998,          Turkish Joint Venture:
strategy. This was achieved at Antalya Airport in        operating the main duty free shops at both              Urart A.S.
2007. Leveraging from the existing ten year agree-       Departures and Arrivals as well as sixteen specialty
ment with airport operator Fraport, Nuance has           shops on a total of 1,850 square metres. The                   Urart A.S.

positioned itself as the exclusive duty free operator    relationship with operator Fraport was excellent and
                                                                                                                  The          Net
at all Antalya terminals until the year 2024, with the   much appreciated by both parties.
                                                                                                                  Nuance       Holding
contract’s sales value over its total 17 year duration                                                            Group
estimated at EUR 3.2 billion. Through this contract,     In 2005, the opening of International Terminal 2,        55%          45%
Nuance anticipates that it will more than double its     operated by Çelebi and IC, led to a material drop in
sales at Antalya Airport.                                sales at Terminal 1, with flights carrying high-spend-   Net Holding
                                                         ing passengers primarily assigned to take off from      ( is a
                                                                                                                 leading company in the
Welcoming nearly fifteen million international pass-     Terminal 2.
                                                                                                                 Turkish tourism industry.
engers in 2007, Antalya Airport is the most import-
ant tourist gateway to the Turkish Riviera. When the     Through the new contract, this situation has now
new long-term management contract for the air-           been amended, with sales more than doubling for
port’s operation was tendered, the outcome of the        The Nuance Group’s joint venture once the contract
selection process was eagerly awaited by all con-        becomes fully operational.
                                                         Commenting on the new contract, Cengiz Iman,
It was a consortium of Fraport and IC Ictas Holding      Managing Director, Urart A.S., says: “My team and I
that in April 2007 secured the contract to operate all   look forward to continuing our excellent partnership
three airport terminals. The concession runs until       with Fraport-IC established over the last ten years
the year 2024: 17 years for International Terminal 1/    which has led to the extension and expansion of this
Domestic Terminal, starting from September 2007;         very important contract. Antalya is a key airport for
and 15 years for International Terminal 2, taking        tourism in Turkey, and it is our ambition to present
effect from September 2009.                              visitors and locals alike with a truly outstanding
                                                         shopping experience at all terminals.”
The Nuance Group was delighted to announce that
its Turkish joint venture Urart A.S. had been chosen
as the new airport operator’s exclusive duty free         Key figures for 2007
partner for all terminals for the duration of the         International passengers          14.845.734
contract. This selection came as the result of an         Domestic passengers                2.547.673
innovative partnership that saw Urart A.S. working        International flights                    89.415
closely with the consortium during their bid and          Domestic flights                         25.410
signing a retail contract that was back-to-back with      Airlines using the airport                187
the consortium’s bid to secure the contract. This         Countries served                           51
approach highlighted the role a strong retail partner
could play in assisting airport investors.

                                                              Strategy In Action
                                                    Differentiation – Example 1:

                                           Differentiating through enhanced selling skills
                                           In travel retailing, it is increasingly difficult to differen-
      The Nuance Group’s
        Growth Strategy                    tiate in terms of product offering. Consequently,
                                           over the past two years, Nuance has invested in a
                                           different aspect of differentiation: selling skills.

                                           Providing top quality service and sales efficiency on

                                           the shop floor, Nuance is aiming for operational
                                           excellence so far unheard of in the travel retail
                                           industry    which     benefits    all   involved    through
                                           increased sales and happier customers.

                                           In 2007, The Nuance Group concluded the global
                                           roll out of Best Selling with the successful launch of
                                           the programme in Hong Kong and Singapore. Best
                                           Selling aims at maximising the productivity of sales
                                           staff by applying best-in-class shop floor manage-
                                           ment practices across the world. The programme
                                           has now been fully embraced by all operating units
                                           and has created a common language and culture
                                           throughout the Nuance world.

                                           From the beginning of its implementation, Nuance                 Looking for a tool to benchmark locations within the
                                           has closely monitored the impact of Best Selling.                Nuance network against each other, a Global
                                           Results demonstrate that the programme is:                       Mystery Shopping Programme was launched in
                                           increasing the productivity of our sales force; opti-            early 2007. The Mystery Shopping Programme has
                                           mising labour costs; leading to better customer                  been highly effective in motivating staff to constantly
                                           service; and heightening the motivation of our staff.            improve their performance on the shop floor. Also,
                                                                                                            Mystery Shopping is in itself a strong message to
                                           The financial improvement witnessed by the                       staff indicating that customer service is The Nuance
                                           operation speaks for itself: In 15 out of 22 Best                Group’s top priority.
                                           Selling locations, sales growth outpaced passenger
                                           growth in 2007. The main reason for this lies in the             Along with these improvements in service quality
                                           emphasis Best Selling places on an active sales                  and productivity, employee morale was closely
                                           approach leading to a considerable increase in                   monitored through a bi-annual employee survey
                                           assisted versus unassisted sales. This, in turn, has             launched across all Best Selling locations. The
                                           led to a clear increase in overall sales.                        results of the survey show that Best Selling is
                                                                                                            improving the morale of sales staff making it a
                                                                                                            programme      that     benefits   the   business,   the
                                                                                                            employees and the customers all at the same time.

                                                                     Strategy In Action
                                                                     Differentiation – Example 2:

Creating solutions for new market demands
In 2007, Nuance introduced a new retail concept           The main features of SWIFT which make it a viable
called SWIFT to the airport marketplace, specifically     option for low passenger volume environments are:
designed to cater for low passenger volume environ-       • Low capital cost – SWIFT retail units are pre-
ments such as gate locations at large airports              designed and completely stand alone (ie can be
and secondary and regional airports with limited            retailed without expensive floor, wall and ceiling
passenger throughput.                                       treatments), as well as double sided, enabling full
                                                            stocking to reduce capital costs per lineal metre
Areas within airports with relatively low passenger         of shelf space;
volumes have typically proved to be difficult environ-    • High flexibility – SWIFT retail units are highly
ments in which to sustain retail, other than very high      flexible, fast to install and quickly moveable either
penetration Food & Beverage and News & Gift                 within store or to different locations (e.g. during a
stores. SWIFT caters for all product categories in a        construction project);
way that is sustainable for low passenger environ-        • Modularity – the modular design allows retail units
ments, expanding the potential to earn retail revenue       to be added or taken away quickly and seamless-
in these airports. By developing a retail concept           ly, improving the manageability of the store; and
specifically targeted at this market segment, Nuance      • Low operating cost – SWIFT has been designed
sought to differentiate itself from competitors.            as a low cost, self-service environment, with
                                                            mobile cash tills, enabling stores to be staffed to
The first SWIFT store was opened in Malta in May            minimise costs and optimise profitability.
2007, both as an Arrivals concept and as a gate
store and has exceeded expectations in growing            SWIFT retail units can stock virtually all product
retail turnover.                                          categories. Typically, the main products on offer
                                                          would include:
The opening of our first SWIFT store in 2007 was          • Basics – Food & Beverage, including a selection
the result of a two year concept development                of pre-packed sandwiches, salads and fresh
process, having identified a new market need                snacks; self-serve coffee and tea; and a selection
arising   from     the   emergence    of   low     cost     of soft drinks/orange juice/water.
carriers servicing secondary and regional airports.       • Almost Basics - Kiosk Products such as confec-
                                                            tionery, chewing gum, candy, snacking products,
                                                            cigarettes, newspapers and magazines.
                                                          • Convenience       –   The   Forgotten     Products:
                                                            disposable cameras, adaptors, souvenirs, gifts,
                                                            toys, games, travel essentials and toiletries.
                                                          • Indulgence – Best Selling Airport Retail Products:
                                                            perfumes,      cosmetics,     alcohol,     tobacco,
                                                            confectionery, fashion and accessories.

                                                          In 2008, the concept will make its debut at Bromma
                                                          and Arlanda airports in Sweden as well as at the
                                                          newly opened Hyderabad Airport.

                                                                    Strategy In Action
                                                                    Spread – Example 1:

Starting up at casinos and resorts
In its ambition to grow, in 2007 Nuance ventured         segment has equipped Nuance-Watson with the
                                                                                                                   The Nuance Group’s
outside the traditional realms of its business by ex-    ideal background to operate this 2,000 square metre         Growth Strategy
panding into a new branch of travel retail: operating    mega store.
outlets at resorts. The rationale behind this decision

was clear: with our extensive understanding of the       In Europe, 2008 will see Nuance enter into resorts

needs and preferences of travelling consumers,           retailing in quite a different fashion from the Macau
Nuance is well placed to serve this customer base        mega luxury store. Through an agreement with
not only at airports, but also at their destination.     Center Parcs, the leader in the UK short break
                                                         holiday market, Nuance will be operating various
                                                         outlets at all of the company’s Villages in Britain,
                                                         offering casual and sports fashion and accessories
                                                         across approximately 2,100 square metres.

                                                         Jean-Paul Bonnel, CEO The Nuance Group Europe,
                                                         explains, “It has been a pleasure to work with the
                                                         management of Center Parcs and to jointly shape
                                                         an attractive fashion offer for their visitors. People
                                                         coming to this resort want to relax, want to have
                                                         fun – but they also want to be inspired. Our aim is to
                                                         go beyond the offer you’d expect to find at a resort
The first step in this expansion process happened        and to come up with something that will make
in an area of the world where Nuance, through its        people want to take home a piece of that very
Nuance-Watson joint venture, has a very strong           special environment they just visited.”
foothold: Asia. In August 2007, Macau saw the
opening of a gigantic hotel and casino resort com-
plex: The Venetian Macau. Built to resemble Venice,
with its canals and gondolas, the complex houses a
substantial luxury shopping mall with Nuance-
Watson’s “The Atrium” mega store at its centre.

“The Atrium” is a multi category luxury department
store based on the successful concept operated by
Nuance-Watson (Hong Kong) at Hong Kong Inter-
national Airport. The customer base of the airport
and the casino complex are similar, and the intimate
knowledge of the shopping habits of this customer

                         Strategy In Action
                     Spread – Example 2:

     Expanding into the German market
     The third pillar of The Nuance Group’s growth             Especially designed for Hamburg Airport, the 200
     strategy is focused on spread: Nuance wants to            square    metre    “CULT”     up-market     multi-brand
     expand its network to new markets, be it geo-             department store concept will accommodate high-
     graphically or in terms of retail channels. In 2007,      end fashion and accessories brands under one roof.
     Nuance achieved one important objective in this           Amongst others, the concept will feature Bally and
     field by establishing a presence in the German mar-       Escada in their dedicated shop-in-shop environ-
     ket – the first time in the company’s history.            ment.

     Germany’s fifth largest airport, Hamburg Airport          The second new concept especially developed for
     serves over twelve million passengers a year. As a        Hamburg Airport is “Young Fashion”, an accessories
     city airport with a large catchment area, Hamburg is      concept covering 130 square metres. The store is
     experiencing steady growth. The Airport is currently      leading edge in that it houses fashion accessories
     undergoing a major expansion programme by build-          of all sorts under one roof. Sunglasses, fashion
     ing the Airport Plaza shopping precinct between           watches and jewellery as well as handbags by the
     two existing terminals. It will incorporate the central   world’s most iconic brands are all presented in
     security check-point and will also be home to a total     their distinct brand environment through a cleverly-
     of 4,450 square metres of retail space and 2,360          designed shop-in-shop approach.
     square metres of food & beverage space.
                                                               Nuance plans to complement these department
     Following discussions held throughout the second          store style outlets with a range of fashion mono
     half of 2007, The Nuance Group has reached an             brand concepts carefully tailored to suit the taste of
     agreement with Hamburg Airport to operate 850             the target customer group frequenting the airport,
     square metres of fashion retail at the new Airport        bringing the total area of shopping space dedicated
     Plaza scheduled to open in late 2008. The offer will      to fashion and accessory retailing and operated by
     comprise exclusive high-end ranges as well as a           Nuance to 850 square metres.
     very fashion-conscious casual wear, targeting
     customers of all age groups and tastes and                Commenting on the importance of the new
     designed to make Hamburg Airport a place to look          contract, Jean-Paul Bonnel, CEO, The Nuance
     for the latest and best in fashion retail.                Group Europe, says: “We are highly pleased about
                                                               the excellent cooperation with Hamburg Airport
                                                               which has enabled us to develop a unique approach
                                                               to fashion retailing in line with the airport’s style and
                                                               philosophy. This is a wonderful opportunity to
                                                               demonstrate our competence in fashion retailing for
                                                               the German market.”

                                                              Board Members
                                                              and Committees

Board Members                                    Audit Committee

Peter Petersen: Chairman; age 66; German         President:     Peter Everts
Function outside the Nuance board:               Members:       Marco Melzi
Board Member MIBAG Facility Management                          Luca Savio

Arturo Bastianello: Member; age 44; Italian      Compensation Committee
Functions outside the Nuance board:
CEO GECOS S.p.A.,                                President:     Peter Petersen
Chairman and CEO Gruppo PAM S.p.A.               Members:       Arturo Bastianello
                                                                Giuseppe Stefanel
Salvatore Dina: member; age 47; Italian
Functions outside the Nuance board:              Board Committee
Commercial Director and Vice President
Gruppo PAM,                                      President:     Giuseppe Stefanel
Director GECOS S.p.A.                            Members:       Arturo Bastianello
                                                                Salvatore Dina
Peter Everts: member; age 63; Swiss                             Luca Savio
Functions outside the Nuance board:                             Marco Melzi
Chairman Loeb Holding AG                                        Roberto Graziani
Vice Chairman Feusi Holding AG                                  Christopher Wood
Board Member Madison Private Equity Holding SA
Board Member Energiedienst Holding AG
Board Member Zurmont Madison Management AG

Luca Savio: member; age 42; Italian
Function outside the Nuance board:
CFO Stefanel S.p.A.

Giuseppe Stefanel: member; age 55; Italian
Function outside the Nuance board:
Chairman and Managing Director Stefanel Group

Lucio Velo: member; age 56; Swiss
Function outside the Nuance board:

Marco Melzi: member; age 48; Italian
Function outside the Audit Committee:
CFO Gruppo PAM S.p.A.

     Executive Management
                                 as of December 31, 2007

                        Roberto Graziani: age 43; Italian                          Jann Fisch: age 41; Swiss
                        Degree in Business Administration, MBA;                    Degree in Master of Business and Process
                        in present function since May 2004                         Engineering ETH Zurich; in present function
                                                                                   since November 2007
                        Christopher Wood: age 46; British
                        Degree in Economics, Chartered Accountant                  Alessandra Piovesana: age 56; Italian
                        (ICAEW); in present function since August 2004             Degree in Applied Economics,
                                                                                   MBA International Marketing and Finance;
                        Ivo Favotto: age 40; Australian                            in present function since June 1999
                        Degree in Commerce;
                        (1st Class Honours, UNSW);                                 Ken Tse: age 50; Australian
                        in present function since April 2007                       Degree in Business (Marketing);
                                                                                   in present function since August 2001
                        Carlo Bernasconi: age 47; Swiss
                        Commercial apprenticeship in Logistics;                    Jean-Paul Bonnel: age 47; French
                        in present function since May 2006                         Master Degree in Economics;
                                                                                   in present function since January 2006
                        Simon Dawson: age 46; British
                        Diploma in Business Studies;                               Richard Rendek: age 42; Canadian
                        in present function since November 2006                    Chartered Accountant;
                                                                                   in present function since March 2004
                        Francesco Cammarano: age 46; Italian
                        Dual degree in Information Technology                      Shiv Kumar: age 42; Indian
                        and Business El.-Ing. ETH, lic oec HSG;                    Post Graduate Degree in Business Administration
                        in present function since May 1997                         MBA; in present function since January 2008

                                                        President & CEO
                                                        Roberto Graziani

          Finance                     Strategy & Business                    Human Resources              Information Technology
     Christopher Wood                    Development                          Simon Dawson                      & Logistics
                                           Ivo Favotto                                                     Francesco Cammarano

                    Retail Services and         Australia             Nuance-Watson            Nuance-Watson
                       Distribution          & New Zealand              (Hong Kong)              (Singapore)
                     Carlo Bernasconi          Jann Fisch           Alessandra Piovesana           Ken Tse

                                     Europe                 North America               India
                                 Jean-Paul Bonnel           Richard Rendek           Shiv Kumar

                                                                                                     Executive Management as of December 31, 2007

The Nuance Group’s Executive Management team
From left: Simon Dawson, Christopher Wood, Jean-Paul Bonnel, Roberto Graziani, Richard Rendek, Jann Fisch, Francesco Cammarano, Alessandra Piovesana, Ivo Favotto, Ken Tse and Carlo Bernasconi

     Shareholders, Auditors
      and Investor Relations

            Our shareholders                                         Auditors
            The Nuance Group is jointly and equally owned by         Deloitte AG
            two Italian shareholders: GECOS SpA and Stefanel         General Guisan-Quai 38
            SpA.                                                     8022 Zurich
            GECOS SpA
            GECOS (, through its wholly             Investor Relations
            owned subsidiary Gruppo PAM, is one of the lead-         The Nuance Group AG
            ers in Italian food retailing, with an annual turnover   Christopher Wood
            of some EUR 2.6 billion and more than 10,000 em-         Chief Financial Officer
            ployees. The company was founded in Venice, Italy,       Unterrietstrasse 2a
            in 1958 as a supermarket operator and has grown          8152 Glattbrugg
            over the years both organically and through acquisi-     Switzerland
            tions; it has also expanded into further segments of     Phone: +41 43 260 3939
            the food retail market such as hypermarkets and          Fax:    +41 43 260 3930
            hard discount. The group also controls a Food &          E-mail:
            Beverage business and is a co-investor in multiplex      Internet:

            Stefanel SpA
            Stefanel ( was founded near Venice
            in 1959. Its initial focus was on the manufacture and
            wholesale of woollen and knitted garments. The
            company has since expanded globally into men’s
            and women’s clothing. Stefanel is now marketing
            and retailing its own Stefanel and Hallhuber brands
            as well as two Interfashion licences. The Stefanel
            Group presently operates over 700 stores mainly in
            Italy and other European countries. The company‘s
            shares are listed on the Italian stock exchange.
                                                                                                        BH 08.04 1000

                      Where to find us

Corporate head office                      Nuance-Watson Hong Kong
                                           Nuance-Watson (HK) Limited
The Nuance Group AG                        Suite 601-604, One Citygate
Unterrietstrasse 2a                        20 Tat Tung Road
8152 Glattbrugg                            Tung Chung
Switzerland                                Lantau, Hong Kong
Phone: +41 43 260 3939                     Phone: +852 2870 6777
Fax:    +41 43 260 3930                    Fax:    +852 2555 8848           
                                           Nuance-Watson Singapore
Regional head offices                      Nuance-Watson (Singapore) Pte Ltd.
                                           #38-008 Passenger Terminal 2
The Nuance Group Europe                    Singapore Changi Airport
The Nuance Group AG                        Singapore 819643
Unterrietstrasse 2a                        Phone: +65 6543 1055
8152 Glattbrugg                            Fax:    +65 6545 6626
Phone: +41 43 260 3232
Fax:    +41 43 260 3933                    The Nuance Group India                  Nuance Group India Pvt Ltd
                                           1st Floor Eureka Towers - C wing
The Nuance Group North America             Mind Space - Link Road - Malad (W)
The Nuance Group (Canada) Inc.             Mumbai 400 064 - India
5925 Airport Road, Suite 300               Mobile: + 91 98210 94083
Mississauga, Ontario L4V 1W1     
Phone: +1 905 673 7299                     Retail Services & Distribution
Fax:    +1 905 673 7307            The Nuance Group
                                           Retail Services & Distribution
The Nuance Group Australia & New Zealand   Unterrietstrasse 2a
The Nuance Group (Australia) Pty Ltd       8152 Glattbrugg
190 Bourke Road                            Switzerland
Alexandria NSW 2015                        Phone +41 43 260 3939
Australia                                  Fax     +41 43 260 3930
Phone +61 2 9384 4777            
Fax     +61 2 9384 4766

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